The Bombay High Court quashed the Notice for Reopening of assessment as it cannot be done merely on the basis of change of opinion.
The Petitioner, Rich Feel Health and Beauty Private Limited has been engaged in the business of selling hair care products, providing consultancy services, treatment in the hair care and beauty sector.
The respondent issued a notice under Section 148 of the said Act stating that he had reason to believe that Petitioner’s income chargeable to tax for the Assessment year 2013- 2014 had escaped assessment. Petitioner, in response to the said notice, filed its return of income. Petitioner, thereafter, filed a reply dated 22/4/2019 seeking reasons for reopening of assessment to enable Petitioner to file its objections. Respondent provided reasons to Petitioner, wherein the principal reason was that advertising and marketing expenditure incurred by Petitioner was not deductible in view of provisions of Section 37 of the said Act, as Petitioner was prohibited from advertising under the provisions of the Indian Medical Council Act, 1956 read with Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the Regulations, for the sake of brevity). On 25/9/2019, respondent passed an order rejecting the objections of Petitioner. Section 37 (1) of the Act provides any expenditure incurred for a purpose which is an offence or which is prohibited by law shall not be allowed.
The division bench of Justice Amit B.Borkar and Justice K.R.Shriram held that the Assessing Officer could not have reopened the assessment merely on the basis of change of opinion and could not have issued a notice of reopening of assessment to Petitioner.
“In view of notice dated 14/8/2014 and order sheet entry dated 4/10/2014, it is clear that the Assessing Officer in the original assessment was aware of the issue of expenses incurred on advertisement and marketing by the Petitioner. Once the Assessing Officer had applied his mind in the regular assessment proceedings of Petitioner having incurred advertising and marketing expenditure, it is not open for the Assessing Officer to reopen the assessment,” the court said.
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